Last week, Moody’s Investors Service placed the ratings of Vista Global Holding Ltd. and VistaJet Malta Finance P.L.C. on review for downgrade. The outlook on both entities has been changed to ratings under review from stable. Then yesterday, Fitch Ratings revised its outlook on its long-term Issuer Default Rating (IDR) to stable from negative and affirmed the IDR at ‘B.’
Fitch has also affirmed the senior unsecured rating on the outstanding $550 million 10.5% notes due 2024 issued by XO Management Holding, Inc. and VistaJet Malta Finance PLC at ‘B+’/RR3. The bonds are guaranteed by Vista and XO Group Holding Limited and VistaJet Group Holding Limited (VistaJet) and their main subsidiaries.
Moody’s said its rating action was triggered by concern that Vista Global “given its weak positioning in the B3 category throughout FY 2020 — might be challenged to improve credit metrics back to the requirements for the B3 rating category in the next 12 to 18 months.”
Vista Global holds a minority stake in XOJET Aviation, Red Wing Aviation, which it bought last year, and wholly owns XO and VistaJet.
Moody’s said the review would consider Vista Global’s business plan for 2021 and beyond with a special focus on its ability to generate positive free cash flow and thus to reduce debt; the company’s investment plans including the purchase of 10 Challenger 350 aircraft from Bombardier and the related financing; and management’s financial policy concerning leverage reduction, potential changes to the company’s capital structure and liquidity cushion.
In its release, Moody’s said, “Absent of a clear path towards these expectations or in case of concerns regarding the company’s liquidity Moody’s would consider downgrading the ratings.”
Reviews can sometimes last 90 to 180 days or even longer. However, for most reviews, they are typically concluded within 30 to 90 days. Historically, about one-third of companies targeted for a possible downgrade end up being downgraded.
Separately, Fitch said its revision to stable “is driven by Vista’s relatively strong performance in 2020 despite pandemic-related restrictions and a decline in demand, which was less significant than that experienced by commercial airlines.”
It noted Vista’s Program, its version of a jet card, “continued to generate operational cash as expected through 2020…Our current expectations for Vista’s business and financial development are for a resumption of de-leveraging after the pause in 2020 and for (funds from operation gross adjusted leverage to be within with the current rating guidelines by end-2021.”
The report went on to credit its 2019 acquisition of JetSmarter, saying the online booking platform, best known for its fly by the seat memberships, “stimulated additional demand and will help VistaJet and XO management maximize their fleet utilization over time.” It added, “The profile of Vista’s customers is likely to lead to a limited impact on them in terms of affordability of private jet services.”
In terms of customer profile, Fitch noted, “About half of its revenue is derived from North America, with the other half equally split between Europe and other regions. Despite a focus on corporate clients and high net-worth individuals and some concentration in financial services, its customer base remains diversified with no client accounting for more than 2% of total revenue.”
Fitch estimates Vista Global’s worldwide market share at 3%, adding, “Operations in the fragmented market provide growth opportunities for stronger players, but they are also subject to strong competitive pressures.”
It also warned, “Vista’s liquidity is tight but manageable supported by the assumption that aircraft debt financing markets remain available. We expect Vista to be moderately FCF negative in the next 12 months due to the growth CapEx.” It concluded, “The group’s reported cash of $110.4 million as of the Q3 2020 along with a non-debt cash commitment obtained for over $100 million offsets the $220 million of debt repayments due in 2021, which we expect to be partly refinanced in line with Vista’s track record.”
Your can read the full Fitch Report here.
In May 2019, Vista Global refinanced with $550 million of senior unsecured bonds. At the time, Paula Seligson, a reporter with Debtwire, told Private Jet Card Comparisons funds were being used to refinance two pieces of debt due in 2020 and 2021 and meaning the company wouldn’t have any more major refinancing obligations until 2024. She said companies typically refinance debt one to two years before it is due, so the bond offering’s timing was typical.
Last week, Vista Global issued a press release touting a number of sales records in 2020. Our analysis of Argus flight hours data from 2019 last August pegged Vista Global as the fourth largest player in the U.S. market. Its November acquisition of #18 Red Wing Aviation would make its share of on-demand charter, jet card, and fractional flight hours around 2.8%. At the time, Vista Global said it intends to grow its light jet fleet to 50 aircraft.
A spokesperson declined to comment about the reports from the rating agencies.
